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In the COVID-19 housing market, companies with tools that let buyers make cash offers were kingmakers.
But when the market slowed to a relative crawl, so too did some of these so-called power buyers that were building themselves into machines to help make winning offers in a hyper-competitive market.
Ribbon stopped its cash offer program in November, saying it would work to create new tools. Knock abandoned its quest to go public earlier this year and laid off nearly half its staff.
Homeward CEO Tim Heyl said his company is built to handle down markets. Yes, his company had two rounds of layoffs in mid-to-late-2022. Yet it still grew 250 percent in 2022, he said.
Heyl spoke with Inman ahead of Inman Connect New York, where he’ll be talking about tech, data and the biggest trends in 2023. He declined to talk about competing companies, but he said there are a few things that set Homeward up to remain relevant, competitive and growing into 2023.
Below is a transcript of that conversation, edited for brevity and clarity.
Inman: You’ve said you’re built for any market. But we wrote recently about a round of layoffs. Let’s talk about that.
Heyl: Homeward grew 4.5 times in 2021 from 2020. We’ll finish the year growing 2.5 times from 2021 to 2022. The trajectory of growth we were on, we were hiring for that. While we’re still growing every month from this time last year, it’s a very different growth trajectory from what it was.
We recognized that one of our product offerings that we had hired for was built around competing in a tight market. That trend is shifting very, very fast. We staffed up for that product specifically. We did a reduction in force of about 20 percent of our team. And then we did another one just recently here.
Tim Heyl
Where does that leave you now? Power buying was so synonymous with cash offers.
Homeward has maybe the best risk model in the space… There are models out there whether it’s iBuyer, rent-to-own, shared appreciation types of models that all monetize home price appreciation. When the business model is based on that, it will do really well when home prices are climbing very fast but not so well when home prices are stable. And it really struggles when home prices are declining.
Our model is not based on home price appreciation or home price at all. Our model is a very short-term inventory hold. We’ll hold our homes anywhere from a day to 30 days. It’s all very manageable because you can make adjustments in real time to underwriting criteria or different aspects to approving a purchase.
Less risk because Homeward isn’t holding a home long enough for the market to keep shifting?
We are facilitating a service instead of being speculative on flipping a home. We’re doing it on behalf of a customer who’s taking on that new purchase.
That’s on the risk modeling. All of our transactions are profitable transactions. Throughout the very sharp turn that has taken place, they’ve all remained profitable transactions.
When Inman writes about some of the disruptors in the space, our audience of primarily brokers and Realtors seems to get defensive. I haven’t noticed as much about Homeward either at Inman Connect events or in the responses to our stories. Why do you think that is?
Homeward is direct to agents. Our whole focus is partnering with agents and bundling services to make it cost-effective to the consumer. Agents keep their commissions and it’s cost-effective for us.
It’s a win-win strategy from a cost perspective from agents, consumers and Homeward. And a great go-to-market. Agents are the keys to the kingdom with the consumer. They are the trusted local relationship.
At Disconnect this year, you were big on the rise of cash offers. That seems to have slowed down. You also talked about the lasting importance of removing contingencies from an offer.
We will still get to a place where offers across the board become non-contingent through things like Homeward’s cash offer. But it’s just going to take a lot longer because the necessity is no longer there.
Real estate is cyclical. In buyer’s markets, you’re going to have sellers who need certainty. In seller’s markets, you’re going to need buyers who need power and confidence in their offers. In all of those markets, you’re going to have the age-old problem of sellers need to sell.
There’s an opportunity to help sellers in the market today. But you need to do it in a way that aligns incentives and is risk averse.
